By Nicole K. Phinopoulou, Lawyer, Banking & Financial Services, Corporate Sustainability Compliance & ESG, LLB. LLM (UCL), LPC, CISL, University of Cambridge
It is a fact that until, quite recently, managing and executive directors believed that Corporate Sustainability/ESG matters, and the Corporate Sustainability Responsibility at large, were more of a trend than the core basis on which businesses now operate.
It is suggested, without further delay to reconsider and reassess their business models effectively in view of embracing a governing sustainable updated model.
The recent preliminary agreement between the European Council and the European Parliament on the adoption of the revised Corporate Sustainability Reporting Directive (CSRD) will be the new corporate accountability guide regarding all Sustainability issues.
The agreement stipulates that an extensive number of companies must be accountable for all matters falling within the concept category of Sustainability, namely the Environment, Society and Human Rights and Corporate Governance. The CSRD also requires that sustainability reports be certified by an accredited independent consultant or auditor, easily accessible and available digitally to all stakeholders, be it investors or ordinary consumers.
The Directive should be implemented by all large companies and all listed companies, and now with the new amendment even Small and Medium Enterprises (SMEs), will also be responsible for evaluating information including also at the level of their subsidiaries.
According to the official announcement, the implementation of the CSRD will take place in three stages:
- January 1, 2024 for companies already subject to the Non-Financial Reporting Directive (NFRD (CSR).
- January 1, 2025 for companies not currently subject to the Non-Financial Reporting Directive.
- January 1, 2026 for listed Small and Medium Enterprises (SMEs), small and non-complex credit institutions and affiliated insurance companies.
The CSRD is one more tool with which the European Union (EU) and its Member States (MS) aim, among other things, to raise more private investment funds, both to tackle climate change and to support the 2016 Paris Agreement, but at the same time aim to achieve the United Nations 17 Sustainable Development Goals (SDGs).
It is recalled that the EU has committed through the European Green Deal that will direct one third of the Next Generation EU recovery package of 1.8 trillion euro towards the implementation of the European Green Deal.
The EU’s aim is, for significant Funds from the private sector, to step up the effort towards a climate-neutral and efficient environment, with respect for natural resources and a fair distribution of economic benefits. It is on this respect, just about a year ago, the European Commission published additional clarifications on its policy context, on sustainable finance to support economic growth while reducing pressure on the environment and taking into account social and governance aspects i.e. financing the transition to a Sustainable Economy. In Cyprus, most companies will not be required to submit the relevant report–at least until 2026. However, in the eyes of consumers, their partners, associates, and investors, organisations will still be accountable to the same regulations and obligations.
“Greenwashing is over,” Bruno Le Maire, France’s finance minister who chairs the Council, stated boldly. Even though the risk of Greenwashing may not exist legally yet, in terms of reputation and good name, the damage it can cause is manifold.
